No more. Businesses today are beginning to understand the great gains to be had by linking rewards and recognition to a business strategy. (See "Targeted Rewards Jump-start Motivation," Workforce, February 1998.) There are specific goals and outcomes expected. But just as important, employees must understand their roles in the greater scheme of things, understand what they must do to get the carrot, and why the carrot is being offered in the first place.
Communication. It all boils down to that one word, but that one word encompasses a lot of things. There’s a great shift in the communication of rewards right now. No longer is it satisfactory to have a once-a-year videotaped message from the CEO talking about company "stars." Today’s rewards and recognition programs must be communicated in the same strategic manner for which they’re being used. Of course, that opens up a lot of questions. How should a company clarify a rewards system? How should a company communicate it? And how does HR know whether employees really understand the link between performance and rewards?
To get informed answers to these three important questions HR managers need to know, Workforce talked to a group of rewards and recognition specialists. They are:
- Carl Weinberg, principal in the Kwasha Lipton Group of Coopers & Lybrand LLP, an HR consulting firm. Weinberg is based in Westport, Connecticut and specializes in company rewards programs.
- Howard Weizmann, managing consultant for the Washington, D.C. office of Watson Wyatt Worldwide, a global HR consulting firm. Weizmann has specialized in benefits and HR for 22 years.
- Jan Burnham, a consultant in employee communications at the ROC Group (which stands for "Return on Communication") in Chicago who specializes in return-on-investment for communication efforts.
- Deborah Gingher, vice president of HR Policy & Strategy for the Prudential Insurance Company of America based in Newark, New Jersey, a company known for its forward-thinking recognition programs. Since her appointment as vice president in July 1997, she has been overseeing a new customer-focused awards program.
The group diverged on some particulars, but agreed on common themes for success: Making sure the company and HR understand what the program is incenting, suitably tailoring the communications to the program, and ensuring employees understand what the criteria for recognition is—as well as the goals recognition represents.
What goals do you want employees to reach?
Before you roll out any kind of program, before you start the communication efforts, our panel says it’s absolutely key that top executives and HR professionals all have the same vision. Have a few meetings where you all share your idea of company goals and rewards program alignment. Executives should speak to where they want to go, HR can speak to how to get employees to get the company there. This is the meeting in which you’ll decide the best approach—monetary or not, broad-based or departmental.
"I like a monetary approach. Some of the most successful types of rewards systems are equity rewards, like stock options or profit sharing. Here’s what we advise employers to do: Start with the compensation committee deciding how to allocate equity between shareholders and employees. Should employees get a 2 percent stake or a 20 percent stake? If you’re a young company, you should be up at the higher end of the range. If you’re in a turn-around, in a time in which you’re asking people to take a considerable risk by coming to work there, then you should be at the higher end. A well-established company will be at the lower end. The next decision is how to allocate among different employee groups.
"Most companies do this pretty badly. They start by deciding how much they’ll give to the CEO, then how much to give to senior management, then everyone else gets whatever is left over. That ignores the central question of where the value is being created. In a pharmaceutical industry where the value is being created in the R&D trenches, you want to make sure a great deal of the equity is going there. A company should identify the positions where having someone outstanding in the role creates enormous value. In many positions, having someone outstanding is better than someone just good, but in a few key positions it makes all the difference. That’s much better than the traditional model where everyone in the same salary grade gets the same amount."
"There’s a very simple premise: If you measure it, people will do it. If you measure it and pay for it, people will do it in spades. If what you measure matches up corporate goals and strategies, the company will be successful. That in sum total is alignment. The most effective way to guide a company is through rewards strategies. To decide a strategy, decide what’s going to make employees happy. [A company] with unhappy employees has as a consequence unhappy customers, and as a consequence won’t do very well. An increase in employee satisfaction leads to an increase in customer satisfaction and translates to an increase in revenue. That’s what you’re trying to do. That’s where the world is going."
"An effective incentive program targets different groups of the workforce on narrowly focused goals—it’s a rifle shot versus a shotgun approach. The advantage is, employees feel they can reach a specific business goal. It’s a focus they can have and measure and link to over the course of a year. This is as opposed to the old incentive programs which were difficult to communicate, because people felt like the targets were so big they couldn’t have an impact—they were vague "improve the bottom line" type of goals. So by narrowing the target, people are feeling like this is a portion of the objectives they can make a difference around."
"We decided rather than to have one companywide program, our many businesses would emphasize their own criteria for rewards. For example, the formal recognition program of our operations and technology function is very specific to rewarding innovative, technology-based solutions for internal business clients. The unit is trying to incent technology folks partnering with business customers and providing creative technological platforms for their business solutions. The auditing function is trying to instill integrity, ethics and leadership among the audit staff. So it has the Extra MILE Award—Merit, Integrity, Leadership and Excellence. At Prudential, we [focus] on incenting specific behaviors unique to each function instead of a broader ‘you’re doing a hell of a job’ kind of thing."
How do you tell your workforce what you want?
So you’ve decided on a rewards system, and all the executives are in agreement on the business goals the system is rewarding. Now you’ve got to present it to the employees in a way that makes sense to them.
"A lot of companies say you have to go super-creative to roll out any new employee program these days: You have to have videos and handouts and themes. I frankly disagree. The most important point is that the message is clear, not that the presentation is flashy. If the company is a ship, and the employees are guiding the ship through the rudder, you need to tell them the exact destination of where you’re going, and exact instructions for guiding the rudder. So be very specific in what you want them to do, and how you will reward them if they do it. Now creativity does have one largely unrecognized advantage. It shows that senior management is taking the program seriously. Employees see all the time and energy that went into it and think, ‘They really mean this.’"
"We have a saying that a good program poorly communicated is much worse than a mediocre program well communicated. You can have all the goals in the world but if you don’t tell people about them you’re never going to achieve them. For the actual communication, it should be sort of a food chain. The first thing you start with is a pay philosophy. Why are you paying people? Ask yourselves what activity your success is measured by. What are you about as a company? Once you’ve done that, you have to communicate those basic objectives. Tell employees, ‘We’re paying you to ship packages in good condition on time.’ For packers, that means this; for drivers that means this. Then link that with your program."
"Most [employers] want to start by talking about the new program and its features. It works best if that’s not your first step. I’d say there are four key steps. One: Make sure that when you talk, they’re willing to listen. You need to establish where the level of trust is. Do baseline measurements and focus groups to see where employees are in their openness to a new program, so when you talk to them they’re ready to listen. Two: Clearly articulate the business case—how the features of the plan link to it. Make sure they understand where the company is. Three: Describe the specifics of how the plan works. [Companies often make] the mistake of starting with the third step and leave the first two out. Four: Don’t introduce the plan and walk away. People need ongoing understanding throughout the year of how the business is doing relative to the goals. A lot of time it’s forgotten. Plan designers get the idea that it’s done once they roll it out."
"Our communication is helped in two ways. First, employees are nominated by internal customers. For instance, HR people can be nominated for excellence in their four HR roles: administrative expert, change agent, employee champion and strategic partner. Then we do a videotape of the customer talking about why the person was nominated. The tape is shown to all 1,000 HR professionals across the country, so they get a very clear picture about what the customer requires. Then we do a lot of employee communications—marketing, e-mails. Most rewards are quarterly so every quarter employees see the nomination process and reward process. E-mails and the company magazine talk about what the criteria is so employees are constantly being barraged by the criteria and specifics on why the winners win. So they get lots of examples. Winners of those awards have a very clear idea of what makes them a success. My advice to other companies would be: Be very specific about the behaviors you’re trying to incent; stay away from broader ‘you did a good job’ programs—they’re too vague and too hard to communicate effectively."
How do you know employees ‘get it’?
Finally, it’s important to know whether, three or six or 12 months down the line, employees are still making the connection between their behaviors, their rewards and the business.
"The best way to know whether the message has sunk in is to listen to what your employees are saying and see if they’re using the same rhetoric. If they’re using the same rhetoric—hopefully not in a sarcastic way—then you know the message has sunk in. If they use it in a sarcastic way, you know some message has sunk in but probably not the one you wanted. Or management can ask people, ‘How are we doing on xyz?’ when they’ve communicated that xyz is important. If people have to fumble for the answer, then they haven’t gotten the message. If they give you a crisp response whether things are going well or not, that shows it’s something they’re thinking about."
"We have a very large client in the delivery industry, and we did a film. We interviewed random employees on the street. We found they were very much aware of what was important. Drivers said, ‘If we don’t get there first our competitors will be there.’ Then we interviewed people in shipping. They said, ‘If I don’t get the right package to the right place our competitors will.’ This showed they understood what the company was all about. So ask employees. If they give [those kinds of answers], the company has been successful in communicating and orienting its goals."
"Always follow up with meetings; this starts a focused dialogue about the business. Soon the talks become less about the rewards and more about the business as a whole. That’s when you know they’ve got it: It’s less about the program and more about the good of the business."
"We do quarterly employee surveys with questions that get to recognition and compensation. And we see that the [program works]. People are really excited and proud and incented when they win these things—even if it’s just a teddy bear. Because we’ve so tailored the competencies that will make [employees] win, we’ve done a better job versus a broad-based approach. People understand what the company expects from them. Rewards and recognition programs are only as good as employees’ understanding of them. Make sure the executive team is in agreement on the program’s goals, make sure they’re communicated clearly and strongly, and follow up later to ensure the workforce really ‘gets it.’"
In short, recognition programs require money, time and energy to create—following up can help ensure they actually get some use.
Workforce, July 1998, Vol. 77, No. 7, pp. 30-35.